Transfer Property to LLC and Tax on Selling Profit

[Jay Truong]

I have 2 scenarios that I would like to ask on the tax. At this point, I don't know whether I should do it.

1. I want to transfer a property I just purchased to my LLC A on title using the Warranty Deed. I purchased it for an amount of $x. If I sell it 5 years later for $y, would my company be taxed on the capital gain ($y - $x) or would my company be taxed on the full selling price $y?

2. I want to transfer another property I purchased to my Incorporation B on title using the Warranty Deed.I purchased it for an amount of $x. Then I will give 50% share of my company to my brother. If we sell it 5 years later for $y, would our company be taxed on the capital gain ($y - $x) or would our company be taxed on the full selling price $y?

[Dominick Austria]

@Jay Truong Generally you will be taxed on capital gains, which is your selling price less your adjusted basis. In the first scenario if you are the only member of the LLC your company will not be taxed. The LLC will be treated as a disregarded entity and you will report the income on your personal return. In the second scenario, it is rarely advisable to put appreciable property into a corporation. If you transfer the property to the Corp and give 50% to your brother you will not be in control of the Corp and may trigger gain on the transfer of property on your personal return. You should consult your CPA for a more detailed explanation.